(Alliance News) - Fresnillo PLC on Tuesday posted an increase in revenue and profit despite lower ore yields, thanks to rising silver and gold prices in the first half of 2020.
The Mexican gold and silver producer said its pretax profit in the half year to June 30 was up 137% at USD127.9 million, despite taking a hit of USD31.8 million from a revaluation of the Silverstream contract as well as USD41.0 million lost from foreign exchange.
Fresnillo said it will be pay an interim dividend of USD0.023 per share, a 12% reduction from USD0.026 a year prior, paid from the remaing balance of retained earnings generated before 2014.
Revenue rose 5.2% at USD1.05 billion versus last year's USD1.00 billion.
The increase in revenue resulted from higher gold and silver prices over the period, as production was lower. The price of silver has increased 31% year-to-date and gold's price has increased 30% year-to-date, Fresnillo noted.
The average realised gold price for Fresnillo increased 27% to USD1,677 per ounce in this year's first half from USD1,320 per ounce in the same period a year prior.
Average realised silver price increase 10% to USD16.8 per ounce in the first half of this year from USD15.3 per ounce a year ago.
Silver production declined 2.7% to 26.8 million ounces in the first half compared to last year's 27.6 million ounces. This was due to the "expected" lower ore grade at the Saucito mine and a lower contribution from Silverstream. The shortfalls were partially mitigated by a higher ore grade at the Fresnillo and Herradura mines.
Gold production suffered a more significant drop of 12% to 381,319 ounces from 432,417 a year ago. The company's gold production took a knock mainly due to closures at the Herradura and Noche Buena mines, which lasted six weeks because of Covid-19.
For all of 2020, Fresnillo confirmed the revised guidance it provided last week of gold production of 785,000 to 815,000 ounces, down from 815,000 to 900,000 ounces previously, and silver output of 51 million to 56 million ounces, unchanged.
Exploration expenses are expected to be reduced to around USD120 million this year, from USD135 million planned previously, the company said. This is due to travel restrictions imposed to combat Covid-19.
"This year has been a watershed for many industries worldwide, and we reaffirm our solidarity with the millions of people that have been affected, particularly in Mexico," Fresnillo said.
Fresnillo shares were down 5.1% at 1,210.85 pence each on Tuesday morning in London.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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Fresnillo (FRES)